Lean Thoughts on Compensation Strategy from Santiago, Chile

Your editor is now in Santiago, Chile for a brief visit before returning home. This is a very modern city… as we noticed when we opened the curtains of our hotel room this morning to see a great view of the city… including Starbucks, McDonalds, and even a Hooters restaurant.

During the city tour this morning, our guide pointed out the large number of city buses… driving incredibly fast in a seemingly erratic manner. It turns out that the drivers are commission-based… paid a portion of the fare of each passenger! This has the "interesting" effect of creating incredible competition between drivers, causing them to rapidly dodge in front of each other to snag potential fares at both official and unofficial stops. We aren´t talking small buses… these are very large metro type vehicles! Passengers often fear for their lives while riding the buses… not to mention other pedestrians ("potential passengers"!) and the rest of traffic in the city. And we won´t even talk about the issues arising from passengers paying cash to the drivers…

Many manufacturers like to use the power of individual incentive, partial ownership of profitability (gain share, profit sharing, etc), or other methods. But the example of Santiago´s public bus system points out one potential downside… the erosion of quality and safety. Many profit-sharing systems also include a balancing measure of quality to ensure that a true company and customer productivity benefit is being achieved.

As it turns out, the multitude of polluting buses are being replaced later this year with clean-burning gas models. And at the same time the entire system is being changed to use the same fare cards as the modern subway, standard stops, and driver compensation as a flat salary instead of being a portion of the fares. The drivers have opposed this change, even with retraining (often including basic literacy) being offered. The city government held strong, and the change is moving forward.